Reap the rewards of refinancing
By Michael D. Larson • Bankrate.com

Whenever mortgage rates are low, homeowners stampede to mortgage lenders, seeking to refinance. The reason is simple: saving money.

Homeowners with adjustable-rate mortgages, people who bought houses early in 2000 and loan holders who missed the refinance boom of 1998 should be the first to get off the couch, hit the computer and start checking rates.

The sour economy of 2001 has helped keep mortgage rates tamped down. "We've had a slowdown in the job market, so income growth has slowed. Consumer confidence has come down. We've had the oil price tax. We've had the drop in the stock market, which clearly hurts the wealth effect," says David Berson, chief economist with Fannie Mae in Washington. "We've also had on the business side a turn up in inventories. On top of that, the housing market has cooled just a little bit.

"We have many sectors of the economy all slowing, at least modestly."

As a result, 30-year fixed-mortgage rates have hovered around the 7 percent mark for all of 2001, according to Bankrate.com data.

ARM holders can save, too
Borrowers who took out ARMs when rates were higher may want to consider refinancing now while the interest rates are hanging around the 7 percent range. Borrowers can lock in long-term, fixed rate loans and protect themselves against the rate fluctuations they'd otherwise have to face if they stuck with their ARMs.

Rates expected to climb
As for the future, most experts say rates will likely climb steadily this year. Refinancing now -- rather than waiting -- may be the best course of action.

-- Updated: Feb.13, 2002